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Article Excerpt
HUMPHREY BORKUM, CHAIRMAN, JSE LIMITED: Mr. Premier, Paul Mashatile, Mr. Minister of Finance for (inaudible), ladies and gentlemen, all the people I can see and all the people I can't see, those people who are tuned in on webcasts, on the conference call, it's my great pleasure to welcome you here this evening. I hope you're going to enjoy the presentation. I hope you're going to stop and have a drink with us and have a chat with us afterwards. And you know the form. I'm going to talk for a minute or two. Russell is the one who is doing all the work tonight. And then you can tackle us afterwards and ask us all those questions you don't want to ask in public.
The first -- well as you can see, I've been given the job of talking through the highlights of 2008. And the first bullet point that has been given to me is, good results for the past year. Now I've been on the Exchange for many, many years. There's some people I've seen in our audience here who have been there a similar period of time. I think of Norman Lowenthal, [Johnny MacGyver]. Maybe there are a couple of others. But I've never seen results like this. They aren't good results. They're fantastic results. Unfortunately, as Russell said this morning to a crowd of people he was talking to, they're history. And what you've really come to listen to today is what's going to happen in the future. And I'm not crystal ball gazing tonight. Russell is going to do that, too.
Another highlight that we had during the year was that we progressed our Africa strategy. Now this is something that a lot of you know. We've spent quite a lot of time on it over the years. It's taken us -- it's been difficult. It hasn't been easy. I'm not quite sure what the reason for it is, whether it's a hangover from the old apartheid days where South Africa was not the most popular country in Africa, or whether it's because people naturally tend to shy away from a giant, I don't know. But we've had a difficult time.
But I think we're making progress. And I'm optimistic. We've launched, successfully, a month ago our Africa Board. We've also launched the FTSE and JSE All Africa indices. There's a possibility of technically linking the SADC exchanges. That's on the cards. And we've been promoting our relationship with African exchanges.
Now we haven't issued any formal announcement about Mauritius because nothing has yet been signed. It's sitting with a regulator in Mauritius. And if that regulator approves us, we'll do a transaction. More than that I can't say, but we are certainly talking to Mauritius. I think that's an open secret.
BESA shareholders supported our proposed acquisition of the BESA business. Now I mentioned earlier on that I've been around for quite a long time. I've never seen a scheme of management yet where 100% of those people voting, voted in favor of the scheme. I think it says a fantastic amount for the Executive of the JSE that the shareholders in BESA have that confidence in the way this Executive is running the JSE. And I think it also puts pressure on the Executive because those people who have voted in favor of that scheme arrangement are actually saying to the Executive, we're looking to you to produce the goods.
We launched our international derivatives platform. The equity and commodity derivative systems were replaced. The single stock futures continued to grow. I want to remind you, I'm talking for the year till the end of 2008. So I know that they haven't grown this year, but I'm talking about last year.
At this stage, I would like to say something that's going to comfort you all about the year ahead. I'd like to look at a crystal ball and say that things are going to get better. But I've been told that I'm not allowed a crystal ball. So I just want to recount to you a little thing that I read from Spike Mulligan, the late Spike Mulligan, a couple of weeks back. And he said -- and this is a particular reference to those of you who have lost money on your portfolios over the past year. And if there is anybody here tonight who hasn't lost money, please talk to me afterwards. I need to know how you did that. Anyway, Spike Mulligan said that money can't buy you happiness, but it sure as hell can buy you a more pleasant form of misery.
Ladies and gentlemen, my pleasure to hand over to Russell who is going to talk to you about our history and about our future. Thank you all very much.
RUSSELL LOUBSER, CEO, JSE LIMITED: Thank you, Chairman. And let me repeat that welcome to our Premier, Paul Mashatile and the Head of Finance of (inaudible). We welcome you gentlemen. Nice to have you here and thank you for the interest that you are showing. Good evening everybody, nice to have you here. And also a warm welcome to the people that have joined us in the conference call and in the webcast. And they'll all have an opportunity to ask questions later.
Let's get right into it. We'll start off with everything that you do know. Humphrey mentioned that this is history. But we have to cover the financial year, which happens to coincide with the calendar year 2008. And I think it's fair to say that we were partly shielded from this global turmoil, but only partly. Our stock markets did fall in the second half. We've had industry-wide retrenchments across the entire globe. And I don't think anything in this audience has ever seen that.
We've always had at least two of the three cylinders firing, if you can simplistically break the world up into three time zones, the Americas, Europe/Africa and the Middle East, and then China/India and the rest of Asia. Nobody has ever seen what we are seeing at the moment. Nobody has ever seen governments having to bail out banks. Normally banks lend to people. Now governments have to lend to banks to keep them afloat. Nobody has seen household names here today, gone tomorrow. Nobody has -- and right across the globe. Nobody has seen major industrial companies, their very existence in danger, right across the globe. And of course, many of our JSE companies are also showing strain.
Fortunately, for the Stock Exchange itself, the trading volumes in these very volatile conditions held up extremely well. And then the question of the foreign investment that we need, we've got a big deficit on our current account of our balance of payments. That's got to be offset by capital inflows. And we didn't get that last year.
We've seen good inflows into South Africa via the Stock Exchange for a number of years. But last year, we saw a net foreign disinvestment. Sellers exceeded buyers by ZAR54b. Fortunately, so far this year, there's a ZAR13b swing. We've seen ZAR4b net foreign investment for the two months of this calendar year. Same time last year, ZAR9b outflow, part of that ZAR54b that is there. So maybe things are changing.
The index, well we started 2008 nice and strongly. We got to those dizzy heights, 33,233 on the ALSI. And now we are just clinging onto the 18,000 level. Had a reasonably good day today, but where do we go from here?
So trading volumes held up nicely up in the second half despite this falling index. The stock exchange industry has faced unprecedented tests. That's for sure. We've had this massive volatility. And then you have this investor sentiment that just disappears. What we have across the world at the moment is a crisis of confidence. We had a failure of the financial markets, fact of the matter, not a failure of the free enterprise market system. These people would like to say, well this is the end of capitalism, especially guys like Putin. And I'm afraid he's going to have to look long for a better system. They just haven't found a better system yet.
But we did have a failure of the financial markets, that is correct. You've had some markets where the interest has evaporated completely, and in some instances, it was because of their own doing. The Russian markets closed more than 11 times -- closed between the middle of September and the end of October -- where the order just comes from above, you will not open the markets today. Now when those types of things happen, then I must not be surprised if the investors don't flock back to those markets when times are normalized again. People will remember that. And I'll talk to that regarding the South African financial markets, specifically the JSE, a little bit further on.
So we've got these real systemic fears where the very existence of financial markets are threatened and major bailouts are necessary. Fluctuating trading volumes, some have seen them gone up. Some have seen them gone down. We're fortunate. We saw them go up. And we never closed.
And then, of course, you've always got these little players nibbling from the side, taking their chances and trying to let people know that they are the new arrivals, so that the regulated -- the properly regulated exchanges are not that important anymore. Well, we'll have to see.
The fact of the matter is I believe that overall, bearing in mind what I've just said that exchanges proved quite resilient, overall, they've operated like they should have, except for those that just closed. And it's not just the Russian markets. The Indian markets were also told, you'll close for the day. Even the Brazil markets. And I've got respect for both those markets.
Point being, markets should operate. They can operate, they should operate, they must operate. And that applies to other enterprises as well, especially...
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